Complex Times, Simples Rules

Quentin Prideaux

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Simple Rules in Practice

One experience involving simple rules began when a financial services firm asked for help in managing priorities for Information Technology projects. They were overwhelmed with project requests, dissatisfied users, and overworked and disorganized staff. IT and business people worked hard to speak a common language and agree on decisions, but the problems just kept getting worse.

Our process started by investigating the simple rules by which the whole business was operating. We discovered, and refined, a set of consistent principles that defined a clearly differentiated positioning for the firm. However, when we compared this agreed view to the demands being made on IT we found many inconsistencies. While one division was asking for maximum IT flexibility (to allow them to quickly integrate newly acquired companies), another was asking for highly secure systems to reduce risk, and yet another was asking for the ability to tailor products to small groups of customers. These requests betrayed the fact that the divisions were diverging on their implementation of group strategy, but had not yet done so enough to ring alarm bells. The problem for the IT group was immediate. A highly secure technical infrastructure would make it cumbersome to integrate acquisitions. Standardizing on one common database would allow rapid response to customers, but would make it harder to quickly develop highly specialized products. The many demands which appeared reasonable on the surface, even to the IT department, were fundamentally incompatible. They represented conflicting ‘simple rules’. The organization had complied with existing rules for submitting requests, preparing budgets, writing project plans, listing change requests, and so forth, but these rules never addressed the underlying problem. The organization incurred enormous overhead by trying to reconcile the irreconcilable.

Once the management team understand their business principles and rules, and how parts of the business were departing from these, they realized that the IT department would never be able to satisfy the current demands of the business: the IT department had been forced to make strategic trade-offs that the business units had never made themselves.

With simple rules identified and incompatibilities resolved, business units and IT were able to set priorities and move forward. There were still trade-offs, but management could resolve these in a comprehensive fashion, not haphazardly. One division did not get the level of product granularity it wanted, another had to understand that acquisitions would not be quickly integrated into the corporate IT infrastructure. All understood what was compatible and what was incompatible with group strategy. Finally the IT department had a clear path forward.

By following simple rules it was able to regain control of its own high-level decisions in a way that supported overall business strategy. Responding to new requests was quicker and more straightforward. The business units were relieved of the pressure to understand technical IT issues and were also able to communicate their intentions in a language that was understood by all.

Experience shows that it is often the IT departments that first exhibit problems when corporate strategy and rules are poorly defined. This isn’t surprising. As businesses become more dependent on information that integrates suppliers, customers, business partners, and the firm’s internal operations, IT serves as the intersection where decisions back up first. The benefits of defining simple rules, however, flow to all departments. From market positioning through recruitment to investor relations a set of consistent simple rules reduces the time to reach decisions, increases the alignment of decisions to with strategy, and introduces a common language that helps resolve conflict.

Conclusions

No organization exists without rules. The rules may be written or implicit, but will always be present in one form or another. The challenge is to write the right kind of rules. By drawing on Complexity Theory we can write efficient rules that can solve complex problems. These rules fit below a mission statement and above operating procedures. They articulate strategy, highlight conflicts and facilitate resolution, and they can streamline the organization by providing alignment while letting individuals act in the organization's best interest.